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The Effect of Local Holdings on Audit Policy and Outcomes
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- Authors
- Issue Date
- 2011-12
- Citation
- Seoul Journal of Business, Vol.17 No.2, pp. 97-122
- Keywords
- local bias ; audit quality ; blockholders ; audit outcome
- Abstract
- This paper examines whether local block holdings are associated with
audit policy and outcomes. For local investors are long-term investors and
they tend to invest a larger portion of their total investment in local companies,
I posit that local block holders will be dedicated investors and have
strong incentives to monitor management. Consistently I find that companies
with local block holders are less likely to have unclean/going-concern
opinions, and more likely to have long-term relationships with auditors.
In addition, although I find weak evidence that the existence of local block
investors affects audit fees, I do not observe any significant difference of
audit fees between firms with local block holdings and firms with nonlocal
block holdings. Overall, this paper shows that information advantage of
local investors can have real effects on audit process through monitoring
activities.
- ISSN
- 1226-9816
- Language
- English
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